Goldman Sachs follows the blog on oil prices

The blog is awarding itself and fellow-blogger John Richardson a pat on the back this morning. The reason is that investment bank Goldman Sachs, the largest player in commodity markets, has completely reversed its analysis of oil markets. They now accept our view that there is no fundamental reason for oil prices to be at today’s high level.

The blog discussed this issue at length in its January 2011 White Paper, Budgeting for Uncertainty, and has maintained its view ever since. This has sometimes been a lonely position, as Goldman’s voice is very strong in the markets. However, on Thursday, Goldman revealed they had changed their mind:

“The U.S. shale oil boom, which saw the country’s oil production rising to multi-decade highs, caught many industry watchers and specialists by surprise and has dramatically reshaped the global oil flows over the past few years”

By coincidence, the blog has this week published another article on the subject in ICIS Chemical Business, which includes the sentence:

“In oil markets, there have been no major shortages of product on the scale of the 1979 OPEC embargo, or similar, to cause prices to rise. And production has actually been rising. US output, for example, has reversed years of decline, and is now back at 1996 levels. Similarly, inventories in the US and elsewhere have often been at near-record levels.”

The blogs are delighted that that their readers have been forewarned of the real position all along. They cannot change the course of events. But at least, as with the collapse of Bear Stearns, the 2008-9 recession and September 2008 financial collapse, China’s slowdown and other major issues, they can keep readers ahead of the game.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.

The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such as oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts.

Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.